Question

Which of the following fiscal policy action would cause the economy to contract?

a. raise taxes
c. decrease the money supply
b. increase government expenditures
d. balance the budget

Answer 1

The fiscal policiy which would cause a contraction of the economy would be the decreasing of money supply - c

When money supply is decreased, this means that a country has less money which is flowing through te country and this in effect means that there is less people who're willing to partake in economy.